The problem arises when you need to convert the asset into U.S. dollars to make it useful for you here in the U.S. If you bought $5,000 worth of Bitcoin and it’s now worth $1 million, there are no tax implications as long as you just hold onto it. But as soon as you convert the Bitcoin back to U.S. dollars it’s going to show up as a transaction the IRS can trace.
The problem arises when you need to convert the asset into U.S. dollars to make it useful for you here in the U.S. If you bought $5,000 worth of Bitcoin and it’s now worth $1 million, there are no tax implications as long as you just hold onto it. But as soon as you convert the Bitcoin back to U.S. dollars it’s going to show up as a transaction the IRS can trace.
Where it really gets messy is some people have simply purchased goods rather than simply converting crypto to US dollars. Particularly purchases made overseas.
I missed out on "investing" in cryptocurrencies. If I had, I'd be getting out due expecting at some point more governments will ban their use. Though, it's possible they have become to big to fail so to speak.